United States: Secretary Clinton Announces "Targeted Easing" Of Burma Sanctions

Introduction

On April 4, 2012, US Secretary of State Hillary Clinton announced that the Obama Administration would relax certain sanctions on Burma to further encourage economic modernization and political reform.  The announcement follows parliamentary by-elections in Burma days earlier that Secretary Clinton described as an "important step" in the country's transition toward democracy. 

Current US sanctions on Burma are comprised of a complex set of laws, executive orders and regulations.  Among the more notable restrictions now in place are: a ban on "new investment" by US persons, a prohibition on the export of financial services by US persons, and a ban on imports of Burmese-origin products and services.  The US also imposes a travel ban and blocks the property of senior Burmese officials and other Burmese entities deemed to have engaged in public corruption, perpetrated human rights violations, or impeded Burma's democracy movement.  According to the Secretary's statement, the US will soon begin a "targeted easing" of the prohibitions on "new investment" and the export of financial services.

Current Ban on New Investment

The current ban on "new investment" by US persons is imposed by Executive Order (EO) 13047 (May 20, 1997) implemented in the Burmese Sanctions Regulations (BSR), 31 C.F.R. Part 537 and administered by the Office of Foreign Assets Control, US Department of the Treasury (OFAC).  The ban extends to the following set of activities with the Burmese government or Burmese entities with respect to resources located in Burma:

• Entering into a contract relating to the economic development of "resources" (to include natural, agricultural, commercial, financial, industrial, and human resources)
• Entering into a contract to supervise and guarantee another person's performance relating to  the economic development of resources
• Purchasing a share of ownership (including equity shares) in the economic development of resources
• Entering into a contract to participate in royalties, earnings, or profits in the economic development of resources (31 C.F.R. § 537.311)

OFAC's examples of prohibited new investment include contracts for the right to exploit or control the development of natural resources or acquire land for constructing a hotel or factory.  The EO also prohibits most types of "facilitation" by US persons of any new investment.

Current Ban on Exportation of Financial Services

The US ban on exporting financial services to Burma is imposed by EO 13310 (July 28, 2003), and prohibits the export or reexport of any financial services, directly or indirectly, to Burma from the US or by a US person, wherever located.  The EO also prohibits "any approval, financing, facilitation, or guarantee" by a US person of a transaction by a foreign person that would be prohibited if performed in the US or by a US person.  General Licenses under the BSR authorize certain transactions that would otherwise be prohibited, including: the use of financial services incident to authorized exports to Burma; non-commercial remittances by US citizens or permanent residents to individuals located in Burma; and the trading of "informational materials."

Possibilities for the "Targeted Easing" of Sanctions on Burma

Secretary Clinton's announcement did not provide details on precisely how the US intends to pursue the targeted easing of these sanctions.  However, according to senior Administration officials speaking on background the easing of these prohibitions will be a "step-by-step process" in which specific industries or sectors will be identified with an eye towards maximizing the immediate impact on the lives of Burmese citizens.  Possible examples cited with respect to exporting financial services include services related to credit cards and banking.  The easing of the sanctions is also intended to bolster reform elements in the country, and avoid rewarding those seen as opposing Burma's liberalization or oppressing minority groups.

Because the bans on the exportation of financial services and new investment were issued pursuant to statutes that grant the President discretion to impose sanctions, these prohibitions lie within the President's authority to terminate or amend without the need for Congressional action.  The same is true for certain categories of blocked persons and officials subject to a travel ban.

Other sanctions, however, are mandated by statute.  Notwithstanding certain waiver authorities, these cannot be unilaterally lifted by the President.  These include the blocking of assets of and a travel ban on certain categories of Burmese persons, a prohibition on the importation of certain Burmese-origin gemstones under the Tom Lantos JADE Act of 2008 (P.L. 110-286), and a general ban on the importation of Burmese goods and services under the Burmese Freedom and Democracy Act of 2003 (P.L. 108-61).  Easing of these sanctions generally will require legislative action by Congress.  Given recent signs of bipartisan support for revisiting sanctions on Burma, it is possible that movement in the Congress may be forthcoming. 

Future Steps Contingent on the Progress of Reform

Secretary Clinton's announcement is an initial step towards future easing of US sanctions, in response to significant and positive changes in Burma now underway.  Presidential action or action by OFAC will be required to ease certain sanctions.  Other signs of normalization include the announcement on April 6, 2012 that Derek Mitchell, currently the US Special Representative to Burma, will be nominated as the United States' first ambassador since 1990; the establishment of an in-country USAID mission; permission to private US organizations to pursue nonprofit activities; and an easing of the travel ban on certain Burmese officials.

While this is promising, the path of reform in Burma remains incomplete.  Serious concerns that may slow the pace of the United States' opening to the country include the stability and scope of the transition, the government's treatment of ethnic minorities, continued detention of political prisoners and Burma's military relations with North Korea.  Accordingly, the planned easing of sanctions, both in the Administration and any potential steps in Congress, is expected to be incremental, and calibrated in response to the progress of reform. 

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